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Tools for Estate Planning

Estate planning is the process of arranging who will receive your assets when you die. One goal of estate planning is to make sure your wealth and other assets go to those you intend (and not to others), with a particular emphasis on minimizing taxes so that your beneficiaries can keep more of your wealth.

But good estate planning also can reduce family strife, and provide clear end-of-life directives should an individual become incapacitated before ultimately passing away. The key tools for estate planning include the following as also mentioned above:


The will is a legal document, usually drafted by an attorney, which specifies how, when, and to whom your assets will be distributed following your death. Your will does not have to be complicated, but it should take into consideration several items. It should:

  • Specify who will receive your assets, including specific bequests.
  • Name a legal guardian for your children.
  • Name your executor, who will manage and administer your estate.
  • Determine which assets pass immediately to heirs and which pass into trusts or other accounts to be distributed later.
  • Specify any charities or organizations you would like to benefit.


In order to accomplish specific or more complex financial goals, you may also need to utilize a trust. A trust is an arrangement to manage distribution of an asset, whether it is a property or cash.

For estate planning purposes, the asset can be transferred to a trust, which then “owns” the property, for the benefit of or eventual distribution to a beneficiary. You can establish and transfer assets to a trust during your lifetime, or you can do so through your will (called a testamentary trust).

Through the use of various trusts, you can:

  • Transfer property to your heirs privately and without the cost and potential delays of probate.
  • Provide ongoing income to a spouse, minor child, elderly parent or someone with special needs.
  • Reduce estate taxes.
  • Benefit a favorite charity.

Powers of attorney

There are two main types of powers of attorney:

  • Financial powers of attorney make financial decisions and manage your assets. They dictate who will handle your affairs in the event you become incapacitated.
  • Health care powers of attorney make decisions for your health care and treatment.

Living will

A living will, sometimes called an advanced directive, indicates your desired treatment if incapacitated. It will also guide your family and health care providers in fulfilling your wishes.

Life insurance

Life insurance accomplishes what no other planning tool can. It provides an instant source of income tax-free cash. Your family members can use this cash to maintain their lifestyle, pay taxes (without liquidating your assets) and carry out your estate distribution wishes.

Beneficiary designations

Whenever you open a financial account, typically a bank, brokerage or insurance account, you’ll be asked to provide a beneficiary for the account. The beneficiary is first in line to receive any funds from the account on your death.

You may divide your assets among multiple beneficiaries, if you wish, and name contingent beneficiaries in case the primary beneficiaries are not alive. Naming a beneficiary designation typically supersedes any other declaration in your estate.

That’s why experts urgently recommend you to name your beneficiaries. If you die without a will, accounts with beneficiaries named may at least still go to your heirs. Many retirement accounts have named beneficiaries.


Everyone needs some degree of estate planning. Estate plans need to be tailored to the needs of the individual. A will or trust should be one of the main components of every estate plan, even if you don’t have substantial assets.

Wills ensure property is distributed according to an individual’s wishes (if drafted according to state laws). Some trusts help limit estate taxes or legal challenges.

A will or trust should be written in a manner that is consistent with the way you’ve bequeathed the assets that pass outside of the will. Enlist a professional in estate planning or succession expert lawyer to draft the will so as to best avoid legal battles and contesting or invalidation/revokation.

  1. A will directs the disposition of your assets after death, while a living trust becomes valid while you’re alive. For many years, a will has been the popular choice. Perhaps that is because in books and movies, passing assets to the next generation is always done via a will. In reality, a will isn’t likely to be the best option for most people.
  2. A will involves the probate process, which comes with unnecessary costs. When you use a living trust, the upfront costs are higher, but no probate is required, which makes it a more affordable option overall. There is one exception. Some states offer expedited and simplified probate if the estate is under a specific dollar threshold. That number depends on the state. Aside from that exception, you should strongly consider a living trust as opposed to a will.
  3. A living trust becomes valid immediately after you execute documents, and your property is transferred into that trust. Then it’s up to you to manage those assets. If you’re an investor, then you can look at it as a form of active management versus passive management, only in this case, active management is more affordable. In addition to affordability, which stems from avoiding the probate process, a living trust will allow you to control what happens to your assets during and after death. Also, unlike a will, a living trust is not public record.
  4. A living trust include tax advantages, a better chance of withstanding the estate being contested and the ability to determine when a small child, grandchild or special-needs dependent will be able to have access to the trust. A living trust is a much faster and easier process than a will, and it is more specific than power of attorney on a will. As long as the trust is funded, the freezing of assets will not be allowed. Be sure to have all assets titled in your trust name.

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Tools for Estate Planning

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